Today I will be sharing with you about a popular business strategy call market segmentation.
What is market segmentation?
Market segmentation is a marketing strategy in which a business or company deals with different market with different offers, prices or packaging.
Let me explain.
Human beings are very different. Our geographical locations are different. Our financial statue is different. Our mindset and beliefs are different.
Because business people have discovered this truth about human nature, they understand that a marketing tactic that works in a particular market may not work in another, so the need for market segmentation.
Should some people are asking me, “What is a market?”
A market is a group of people who have needs for a certain product or service and who have the ability and authority to purchase.
As an entrepreneur, you will call a particular group of people your market if they are people you know are in need of the products or services you`re selling and they are willing to pay for what you`re selling.
Let me give you one or two example of market segmentation before I will share with you types of market segmentation.
Think about MTN.
MTN is a mobile telecommunication company with the headquarters in South Africa and branches in many other countries of the world, including Nigeria.
MTN, though operating in South Africa with some marketing strategies, will not apply exact same strategies in Nigeria.
Because the market situations are different. The people are different. The culture is different.
Now you`re getting my point. That`s market segmentation.
Don`t be surprised with this. Sometimes companies sell at different prices to different people in different location. A good example that comes to mind is Facebook.
If you`re running advert on Facebook (which is what Facebook is selling to make money), you will find out that the amount of money Facebook will charge you if you are running advert for people in Canada is different from the amount of money they will charge you for running advert to people in Ghana, Nigeria or Cameroon.
What is happening here?
The bottle and can packaging Coca-Cola is using for certain countries may be different from others. This may be so for several reasons ranging from culture, competitors or geographical location.
Let me share with you
Types of market segmentation
- Cultural market segmentation
Just as explained above, a company opening a new branch in a place with different culture will want to amend its marketing tactics to meet the new culture.
Let me give an example here.
If you`re selling clothes in Southern Nigeria and you have a photograph of a lady as your bill board advert, when you`re planning to use a similar bill board advert in Northern Nigeria, you have to put some thought in to it.
Does this lady dress without covering her head? Does she wear clothes that is against the culture of the people in north? How can she dress in order to speak to the minds of your new market?
Considering all these will help you to segment your market appropriately.
- Behavioural market segmentation
Companies at times divide their consumers according to the behaviour of the people therein. This behaviour may be in term of knowledge, educational level or attitude.
If you have a company in South Africa and planning to expand to Ghana, do you think people in these two countries think the same way? Do they have the same attitude toward a product/service like yours? Is their educational level the same?
Since these people are different, it`s entirely different marketing strategies that will win them to your side.
- Geographic market segmentation
Marketers can divide their market and tactics according to nations, states, cities or communities.
A company may sell certain product in Western Nigeria and couldn`t sell the same in the East (or it has to offer it in a different way)
Law of a particular country or state can allow you to sell certain products/services while those are totally outlawed in some other places.
Let me give an example here.
A brewery is producing alcoholic beer, wine and non-alcoholic juice. This company will not offer the same products in Zanfara (a state in northern Nigeria) as they offer in Lagos (another state in western Nigeria) because alcoholics is outlawed in Zanfara state, but not in Lagos.
- Demographic market segmentation
Some smart marketers may consider demography such as age, gender, occupation or education.
This reminds me of some facebook adverts I ran. In those ads, I will targeted male of age 27-47 (or something similar). In this way, I am marketing to a group of people I consider needs what I am selling most.
That`s how a market could be grouped demographically.
In this way, business person is able to tailor his/her marketing message in the language understood by his/her target.
You know, don`t you? The way you will talk with a 15 year old lady isn`t the same way you will talk with a 25 year old guy.
- Psychographic market segmentation
Sometimes marketers have to take time to study the lifestyle of their prospective customers and tailor their marketing approach to meet their needs.
How your customer live affect how they buy. The way drunkards live is different from the way born again Christians live.
The way students live and think is different from the way working class in a particular society live and think, isn`t it?
So if you`re selling to a certain groups of people, you may want to separate the offers, products or services you expose to a group from that of others.
- Segmentation by benefits
We can divide our market according to the benefit they seek or desire.
Certain people desire certain things. Primary school pupils may desire a soft drink that is sweet (which means it contains a lot of sugar) while a grown-up (35 year old) adult may desire a low-sugar drink.
Since the benefit these different set of individual want is different, we can segment their markets and offer them different products.
Here is another aspect of market segmentation we should look into.
Let me give you another example with MTN.
When MTN first came to Nigeria, they were just as powerful as a monopolist. This market domination gave them some unfair advantages.
They were charging #20,000 (and above) for a sim card and charging terribly high prices for calls.
At this very time, they were struggling in their home country (South Africa) with the market leader there, Vodacom. There was no way they possibly could charge any outrageous price in south Africa because they were struggling with competition, but here in Nigeria, they are the king, so they could charge such high prices.
This happens all the time.
In fact, many companies have branches that are not profitable, yet they keep them active because they are able to have some advantages in other segment of the market.
Should I give you example on this?
UBA (United Bank for Africa) opened a branch of their bank in my town in the year 1983.
My little town as at that time was not profitable for a bank, yet, they keep that branch active till date because they could get some profit needed to finance that branch from other segment of their banking market.
Why market segmenting?
What could possibly be the advantage of dividing markets and approach them with different marketing tactics?
Well, so as to speak the right message to the right people and to give certain people the exact thing they desire.
The primary aim of marketing segmentation is to maximize our opportunity in the market… to have more sales and more profit.
Thanks for reading, we love you.